Romanian Leu Gains Most in One Month After Cyprus Bailout Deal

By Andra Timu and Irina Savu -
Mar 25, 2013

Romania’s leu strengthened the most
in almost a month after Cyprus avoided a disorderly default by
securing a bailout from the euro area, boosting investors’
appetite for riskier emerging-market assets.

The Romanian currency appreciated for the first time in
three days as finance ministers from the 17-nation region agreed
on the outlines of an aid package last night, paving the way for
10 billion euros ($13 billion) in emergency loans. The leu
gained 0.7 percent this year as Romania’s inclusion in major
emerging-market debt indexes this month buoyed foreign
investors’ demand for the nation’s bonds.

“The short-term reaction in central and eastern Europe
could be better bids returning to the more solid markets such as
local currency Romanian bonds which sold off recently in the
wake of Cypriot bank woes,” traders at the Vienna-based Erste
Group Bank AG wrote in a note today. “It still remains to be
seen if the surviving banks will avoid deposit flight after
opening.”

The leu appreciated 0.3 percent to 4.4145 per euro by 5:02
p.m. in Bucharest, the biggest gain on a closing basis since
Feb. 27, according to data compiled by Bloomberg. It lost 0.8
percent last week as European leaders searched for a solution to
Cyprus’s financial crisis.

The leu advanced this year after JPMorgan Chase & Co. and
Barclays Plc announced the addition of local Romanian bonds to
their benchmark debt indexes from March 1 and March 31,
respectively.

The inclusion helped the Bucharest-based Finance Ministry
raise a record 11.4 billion lei ($3.4 billion) of local debt in
January. It issued 4.03 billion lei of fixed-income securities
last month, more than the 3.7 billion lei planned, and sold the
targeted 3 billion lei of bonds this month.